CBA chief in waiting wary of euro-zone woes

The new chief executive of the ­
Commonwealth Bank
,
Ian Narev
, has ­singled out Europe’s debt crisis as a key risk as he prepares to take the reins of Australia’s biggest financial ­institution.

Mr Narev, 44, said it was too difficult to gauge what impact the troubles in Greece and other indebted European countries would have on the cost of funds the bank borrows on international markets, but the issue was being watched closely.

“It has hit me over the head like a plank over the past few years that you cannot gaze into crystal balls on this issue [funding costs]," Mr Narev said.

“We wake up every morning hearing about what is happening in Greece and . . . we see the impact of that every day on the cost of wholesale funding."

The high cost of borrowing on international markets was cited as the main reason CBA and the other major banks raised their home loan interest rates by more than the Reserve Bank of Australia’s official rate last year.

CBA, Australia’s largest mortgage lender, borrows about 40 per cent of the funds it needs to lend to customers on global money markets, where costs are rising amid concerns Greece will default on debt repayments.

Mr Narev, the head of CBA’s business and private banking division, will take over as chief executive in December when
Ralph Norris
retires.

“I am not in a position to tell you what will be happening in the euro zone next week, let alone in six months’ time," he said. “The only thing we know right now in terms of funding costs is that we are going to be in a period of sustained uncertainty and the organisation needs to be prepared to understand what is going on and respond accordingly."

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The appointment of Mr Narev, who has a background in mergers and acquisitions, is fanning speculation that CBA will make a greater push offshore to drive growth.

UBS analyst Jonathan Mott said acquisitions in Asia might well be on the bank’s agenda.

“We believe that the [CBA] board may view the status quo as no longer sufficient in a low-growth domestic banking environment and it may be looking to Ian Narev to drive additional avenues of growth," he said.

“This may include . . . selective international expansion."

Mr Narev has vowed to be his own man after taking over from Mr Norris, but said there would be no major change in strategy.

“My time as chief executive is still several months away, so it is too early for me to share any detailed thoughts on how we will do all that," he said.

“What I can say is that, as is natural in any change of leadership, there will be some differences in style and focus. But I will ensure a high degree of continuity with the strategy that we have pursued over the past six years."